The gold price has fallen amid turmoil in commodity and financial markets, dropping up to 5% since Friday. Outflows from the world’s largest gold ETF amounted to 9.4 tons over the last two trading days.
Market participants have had to sell gold positions to counteract losses in equities. The price occasionally dipped below $3,000 per troy ounce, influenced by rising rate cut expectations for the Federal Reserve.
Gold Purchases By The People’s Bank of China
The People’s Bank of China reported gold purchases for the fifth consecutive month, although holdings increased by less than three tons month-on-month. This level of buying was below previous months, likely due to the recent price surge.
This decline in gold prices, spurred by broader market dislocations, reflects how speculative positions are being reassessed under renewed pressure. With equity markets retreating and risk appetite muted, traders seem to be rebalancing towards cash or lower-volatility instruments. Forced liquidations and margin calls in other asset classes are likely playing a role here, prompting shifts that are indirectly punishing gold despite its traditional safe-haven reputation.
At the same time, rising expectations of rate cuts from the Federal Reserve—seemingly counterintuitive for gold weakness—are causing mixed signals to move through the market. We’re observing a disconnect between what policy expectations would normally suggest and what’s actually unfolding in real-time positioning. Rate-sensitive assets are recalibrating, and the reactions across major commodities reflect more of a liquidity crunch than a change in fundamental outlook.
ETF outflows, particularly from the largest fund, highlight this realignment. When over 9 tons are moved in just two sessions, it suggests broad-based repositioning rather than simply profit-taking. We see this as evidence that institutions are trimming exposure where volatility metrics are climbing. For short-term traders, this should act as a caution signal; these types of capital shifts often lead to continued short bursts lower before balance is restored.
Central Bank Strategy And Market Implications
Meanwhile, from a central banking angle, China’s continued gold buying—though slower compared to earlier months—signals that the recent surge had stretched their internal purchasing limits or policy preference. A three-ton addition is modest. It likely represents a response to price rather than strategy. For futures traders, that implies reduced buying support near the highs, creating fewer structural floors in the short term.
Now, timing becomes more relevant. When safe-haven flows retract and ETF reductions coincide with wide market drawdowns, price support from both public and private buyers weakens. This means short-dated derivatives positions require tighter discipline, both in terms of exposure and duration. We would lessen leverage and avoid leaning on outdated hedging assumptions tied to central bank accumulation.
Price action dipping beneath $3,000 per ounce—however briefly—illustrated how brittle recent support levels have become. That broken threshold, even temporarily, shifts the psychological tone in options positioning. Should more contracts expire beneath those levels over the coming weeks, delta adjustments from market makers may further amplify volatility. That creates scenarios where futures spreads widen amidst declining open interest—movements we typically interpret as short-covering or risk-off posturing.
Tactically, we’re prioritising shorter expiries to manage gamma more dynamically. Slower institutional flows and mechanically driven ETF exits leave the complex more exposed to retail-driven flows, which often chase near-term momentum. In such an environment, when major funds dump gold and central banks pause aggressive accumulation, directional bets based on historical assumptions should be carefully reevaluated.
